Retail Sales Much Stronger than Expected

The February US retail sales data was much stronger than expected, even when taking into account the downward revisions in January. A picture of a broadening of the recovery is emerging. Looking at the Jan-Fed period combined, the headline rate rose a combined 0.4% and the market had expected a 0.3% increase, but the real strength is excluding autos and gasoline. The market expected a 0.9% increase. Instead it rose 1.4%. Ten of the 13 major categories of good/services increased, led by electronics (3.7%) and appliances. The core–ex auto, gasoline and building materials, feeds into GDP estimate. It rose 0.9% and is up 4.5% at the three month annualized pace. This is off the 5.4% pace in Q4 09, but is well above the 1.4% pace of Q3.

Combined with yesterday’s news of a smaller US trade deficit and Canadian figures, including today’s Canadian employment (even discounting the Olympic effect), the strength of the North American economy is evident.

Corrective forces were cut short by the data as the dollar had slipped to the lower end of its recent ranges against the European currencies. The euro was turned back from almost $1.38 and sterling had neared the $1.5200 area. If these levels are not taken out today, it may leave the players looking to again probe their downside next week.

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Marc Chandler is the global head of Brown Brother Harriman’s top ranked Currency Strategy Team. For more of BBH’s currency views, please visit the BBH FX website here.

The opinions expressed in this post are those of the author and not necessarily those of Brown Brothers Harriman & Co., its subsidiaries and affiliates (BBH). This information is not intended as financial advice or an offer or recommendation of any financial products and is subject to change without notice. Recipient agrees that it is solely responsible for any trading or investment decisions that it makes after reviewing this information and that BBH bears no responsibility or liability for such decisions or use of this information.

Marc Chandler joined Brown Brothers Harriman in October 2005 as the global head of currency strategy. Previously he was the chief currency strategist for HSBC Bank USA and Mellon Bank. In addition to frequently providing insight into the developments of the day to newspapers and news wires, Chandler's essays have been published in the Financial Times, Barron's, Euromoney, Corporate Finance, and Foreign Affairs. Marc appears often on business television and is a regular guest on CNBC and writes a blog called Marc to Market. Follow him on twitter.

“Combined with yesterday’s news of a smaller US trade deficit and Canadian figures, including today’s Canadian employment (even discounting the Olympic effect), the strength of the North American economy is evident.”

To whom, the ruling class? Certainly not the wage and salary earning classes.

Anonymous says 9 years ago

Put down the Kool Aid, my friend. Spending is up, which is great, but savings is already heading south again. This explains a great portion of the gain here. January had a big revision down so what are the odds Feb. will as well. I say high.

Third, the government is giving more refundable tax credits to Earned Income Credit tax filers through the Recovery Act (about $30 billion). Most EIC filers have done so by the end of February. This certainly caused an ephemeral boost.

This number is certainly better than a drop, but when one digs deeper, it isn’t anything to celebrate.

Carmeloc04 says 9 years ago

Correct, besides the methodology is bogus#The advance estimates are based on a subsample of the Census Bureau’s full retail and food services sample. A stratified random sampling method is used to select approximately 5,000 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million retail and food services firms# and this is consistent with decreasing sales tax revenues released recently

Glen says 9 years ago

Had January not been revised, Feb would have been down .1% while the Gallup reading came in at -5.8% on Jan.